It is a genuine pleasure to be with you this noon to pay my respects to the publishers of New England, who I must say have always treated me very generously in the so-called “one-party press”.
I gained a new appreciation of how important publishers are when I read in the April issue of American Heritage that, in 1851, the New York Tribune and publisher Horace Greeley employed as their London correspondent an obscure journalist by the name of Karl Marx. Foreign correspondent Marx, it seems, stone-broke and with a family ill and under-nourished, constantly appealed to Greeley and managing editor Charles Dana for an increase in his munificent salary of $5 per installment – a salary which he and his ghost-writing assistant and patron, Friedrich Engels, ungratefully labeled as “the lousiest petty-bourgeois cheating.”
Indeed, it was apparently the Tribune that made Marx an expert on capitalist exploitation – for he used to scream to Engels, in language exceedingly inappropriate to the gentlemanly traditions of the press, that this “lousy rag”, as he called the Tribune, run by two “lousy bums” Greeley and Dana, was exploiting Engels and himself like “paupers in a workhouse.” (Only a Communist would refer to publishers in those terms!) In any event, when all his financial appeals were refused, Marx looked around for other means of livelihood and fame, eventually terminating his relationship with the Tribune and devoting his talents full-time to the cause that would bequeath to the world the seeds of Leninism, Stalinism, revolution and cold war. If only this capitalist New York newspaper had treated him more kindly, if only Marx had remained a foreign correspondent, history might have been different – our taxes today might be lower – and I hope all you publishers will bear this lesson in mind the next time you receive a poverty-stricken appeal from Washington for a small increase in the expense account.
I can personally testify that your Washington correspondents and wire service representatives are hard working men and women – and they have been caused some extra hard work and long hours by the subject which I want to discuss with you briefly today, the Senate’s investigation of labor racketeering. Washington newsmen have, on the whole, done an excellent job in covering those hearings; and your newspapers, along with those in other parts of the country, have done an excellent job in presenting these revelations to the public in an understandable and judicious fashion. Education of the public in these sometimes sordid and shocking matters is a joint undertaking of our committee and the press – for we have uppermost in our minds the advice of Woodrow Wilson, when he said: “The best thing that you can do with anything that is crooked is to lift it up to where all the people can see that it is crooked – and then it will either straighten itself out or disappear.”
I shall return in a moment to the other responsibility or objective which the Congress has in this matter – that of legislation. But before I do, I want to stress that the problem of labor racketeering is not one for the Federal Government alone, or even primarily. The responsibility for cleaning up this deplorable situation is divided also among union members, employers, local government and the general public.
Union members and honest union leaders have the most important responsibility of all. The internal operations of their organizations are, and properly should be, a matter of concern primarily to them. They should write their own regulations, they should do their own policing. But they cannot depend upon dishonest elements to police themselves. It is not surprising that the Teamsters Union has thus far not seen fit to dispose of the President who abused his position and misused union funds; it is not surprising that Mr. Beck, in turn, would not take action against vice presidents Hoffa or Brewster, when they brought disrepute upon the union movement; nor is it surprising that Mr. Brewster, in turn, failed to take action against those local officials in Portland and Seattle who involved his union in criminal conspiracies.
Fortunately, the top leadership of the AFL-CIO has taken decisive action on this matter. An Ethical Practices Code has been adopted which clearly prohibits unions and union officials from engaging in all the racketeering practices uncovered by our Committee. The Executive Council, moreover, specifically requested all members and leaders to cooperate with any properly constituted investigating body, and to answer all questions asked about racketeering activities. The Executive Board recognizes, I believe, that many of these union officials under fire are not legitimate union leaders who came up through the ranks but racketeers who moved in from the outside, giving a bad name to millions of honest, loyal union members. I believe they recognize, therefore, that the current investigation is not anti-labor, but pro-labor – isolating the hoodlum element which is preying upon the labor movement and particular unions in it, and isolating that element in order to protect the good name and legitimate activities of the overwhelming majority of union members.
Rank and file union members have a responsibility, too – to attend union meetings, to insist upon their rights, to review carefully the use of union funds and to select carefully the leaders whom they will entrust with their union’s good name and authority. Whenever those leaders, however powerful, fail to live up to that trust or fail to cooperate with proper authorities, it is up to the labor movement itself to purge this undesirable element.
But let us realize that the rank and file are not wholly to blame – these mobsters do not gain control through honest ballots. In the Teamsters Union, the management of one out of every eight locals has been taken out of the control of the members under a so-called trusteeship system and placed in the hands of trustees appointed and removed by Mr. Beck himself. Members of these locals have no opportunity to approve or disapprove of their officers or of the way their money is spent. I know of no other union, I am glad to say, which has a significant number of locals under trusteeship.
Employers, also, have a major responsibility if labor racketeering is to be cleaned up. For it is a shocking fact that many employers, large and small, have collaborated in and benefited from labor racketeering practices, forcing their competitors out of business, obtaining monopolies for themselves, fighting legitimate union organizations and paying off racketeers in the process. Employer and business organizations ought to take prompt steps to repudiate and clean out this element. Other employers are honest but timid – fearful of the labor trouble or physical violence that may result if they refuse to yield to the threats of racketeers or agree to testify before public authorities.
Perhaps most discouraging of all the testimony received by our committee in the past two weeks has been the attitude toward Mr. Beck’s financial manipulations on the part of those from the management side of the table who collaborated with him. Mr. Beck, president of the nation’s largest union, apparently lent one and one-half million dollars in Teamsters dues to the president of the nation’s largest truck trailer manufacturer, to enable him to win a proxy dispute. This manufacturer, in turn, collaborated with the nation’s largest truck operator to give Mr. Beck a $200 thousand loan. Mr. Beck also used union funds to enable the nation’s largest merchandising organization to win a proxy fight; and this organization in turn suddenly agreed to sign a union shop contract with Mr. Beck. Mr. Nathan Shefferman, one of the largest management consultants in the country, was repeatedly used as a cover by which union funds could be funneled for Mr. Beck’s personal use; and the largest insurance handler of union welfare and pension funds, while making an exorbitant annual profit each year from Mr. Beck’s union, was engaged in giving Mr. Beck personal loans of more than $300 thousand and other special privileges. I do not say at this time that these businessmen, and others who appeared before our committee, were guilty of illegal conduct; but I was deeply disturbed by their participation in and condonement of Mr. Beck’s various manipulations. And when the nation’s largest business concerns and largest union are collaborating in this way, it seems to me that the rights of the average businessman and the average union member are in jeopardy.
Local government has an important responsibility, too. Labor racketeering thrives on weak, fearful, biased or, worst of all, crooked local officials. It takes integrity to refuse a bribe; it takes intelligence to distinguish between racketeering conspiracies and legitimate labor activities; and it takes courage to go after powerfully entrenched racketeers – and there is no reason why these qualities should not abound in local offices. Conspiracy, violence, fraud and similar crimes, moreover, are state and local offenses, not Federal. Yet it is true that no state can by itself handle a problem that spills over many state boundaries; nor can a single state body expose that problem for all the nation to see as well as a Congressional Committee equipped with the power of subpoena.
The Federal Government, therefore, does have a responsibility in many ways. Involved are violations of the anti-trust laws; violations of the Taft-Hartley Act, which forbids several of these practices and prohibits union officials from taking payments from employers; violations of the Hobbs Act, which makes it a felony for a union leader to demand an extortionate payoff; and violations of the Internal Revenue Code on the part of labor racketeers misusing union dues and welfare funds. These laws, I am confident, are presently being enforced; we should not mistake the intentionally deliberate and quiet pace of the judicial process for an absence of effective statutes.
The Congress, therefore, has no intention of being precipitated into unnecessary restrictive anti-union legislation, which has no bearing on the specific type of racketeering practices which our committee has been uncovering. Nevertheless, I am convinced that additional legislation in some areas may be necessary. Indeed, one of the most surprising revelations to come out of the investigation of Mr. Beck’s financial misdeeds is the total lack of any Federal legislation to cover situations of this sort, and to protect union members against such action in the future.
There is no Federal law to prohibit the embezzlement or misappropriation of union funds by union officials, to prevent them from mixing union funds with their own money, or to require that union officials who handle great sums be bonded.
There is no Federal law on unions, similar to the Act of 1940 applicable to investment companies, which prevents officers from borrowing funds from the general treasury, selling their own property to the treasury of receiving a cut in the profits (whether a kickback or a commission) from transactions they helped to arrange.
There is no Federal law for unions, similar to that governing stockholder corporations under the Securities Acts, which permits the union or its members to recover into the treasury any personal profit which an officer made as the result of abusing his official position.
There is no Federal law which would enable any agency of the Government to detect the mishandling of union funds such as this committee has revealed. The financial reports filed under the Taft-Hartley Law should be made public – but this alone would accomplish little or nothing, and would have prevented none of the misdeeds discussed today. For those reports are completely inadequate and frequently inaccurate, containing no detail or breakdown to reveal transactions such as these. They contain no listing (as the SEC asks of all registrant corporations) of all transactions, past or proposed, in which the principal officer or his associates has any interest. The accuracy of these reports is not subject to any check by the Labor Department or any independent audit; they are not filed under oath; and no union is penalized for filing false information.
There is no Federal law to provide safeguards that might facilitate democratic control of unions by their members, to give the members a voice in the direction of their welfare funds, to require the consent of the members to any large or unusual expenditures of their dues, to prevent repeated abuses of the device of trusteeship that eliminate local control altogether, or to protect workers arbitrarily excluded from membership or penalized for objecting to questionable union policies.
Finally, there is no Federal law governing the operations of employee health and welfare funds, which provide unlimited opportunities for graft, racketeering and abuses of every sort. These plans, whether operated by unions, management or both, are not at the present time registered with any Federal agency or subject to any kind of annual reports or audits. They are not required to meet any minimum standards or safeguards in terms of the adequacy of their reserves, the existence of collusion or discrimination or their use by union officials for personal gain. There is no requirement that commercial insurance carriers handling such plans be selected through competitive bids solicited from a substantial number of reliable companies.
As Chairman of the Labor Subcommittee of the Senate Committee on Labor and Public Welfare, I am at this time announcing hearings to be held by our Subcommittee beginning this month on the matters which I have mentioned. It is our intention to begin with a series of hearings on the complex questions relating to welfare and pension plans, on which some legislation relating to their disclosure is presently pending before our Subcommittee and on which I am planning to introduce additional regulatory legislation in the near future. Thereafter, we shall hold hearings on the other aspects of union financial affairs which I have outlined.
But without intending in any way to slight the hard work and valuable results of the present Select Committee investigation, I would say in all candor that it is much easier to investigate than to legislate. The registration and regulation of welfare and pension plans, for example, raises a host of complex and sensitive problems. The total reserves of pension funds in this country are somewhere in excess of 25 billion dollars. Their growth has been phenomenal in the past 11 years – today employers are contributing nearly 5 billion dollars a year to such programs and employees are contributing approximately half that amount. Their benefits to wage earners, the sick, the aged and the disabled, and to the insurance and banking industries and to the securities and investments markets, are unsurpassed. The SEC has reported that pension funds reserves alone are currently the largest single source of equity capital.
Most of these plans are being administered responsibly and honestly – and our committee cannot lightly undertake legislation which might damage this tremendous program. The abuses and irregularities of a few union officials and a few insurance companies must not be used as a basis for harming the more than 75 million people who are covered in some measure by employee welfare and pension programs.
Our task, therefore, promises to be a most difficult one; and we can well expect to be criticized by union, management, insurance, banking and other representatives for our efforts. The public furor over the revelations of our investigation may not be equaled by a demand for remedial legislation that is not pleasing to all. But that is why, in the last analysis, that the general public has the greatest responsibility of all. For it is the public that pays higher prices and higher taxes as the result of this racketeering but does little of nothing about it. It is the public that tolerates corrupt, frightened or simply apathetic public officials; it is the public that shrugs off these sordid tales as inevitable developments about which nothing can be done; and it is the American public, in the last analysis, that is going to determine whether labor racketeering stays or falls.
It is up to the people in every state, in organizations such as your own, in positions of responsibility and leadership such as you hold, to follow through to the end, until this scourge is eliminated from our society. I know we can count on you to do your part – not for any glory or profit to yourselves, but for your state and your country, for your families and your friends, for all we believe in and all we hold dear.
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